Appendix - Business Model: Patrick's Cod Fishing Ltd

Patrick is the proprietor of a Murray Cod fishing business called "Patrick's Cod Fishing Ltd". Patrick possesses the necessary licence from the State Fisheries Board at $20,000.00 per Cod Net.

Patrick catches the Cod fish and sells them to export wholesalers. This means that for GST purposes, Patrick's Cod Fishing Ltd sales are GST free. Patrick is however still entitled to claim the GST that he has to pay on his payments.

Information and base assumptions

for the trading year 1st July 2016 to 30th June 2017

EXPENSES ASSUMPTIONS from 1st July 2016annual increase

fish price per kilo3.333%

variable expenses10% except as below

oregistrations, insurances5%

olicences5%

obank fees5%

owages3%

ofish food3%

CAH FLOW ASSUMPTIONS

Average monthly sales are 150kg per day x 30 days = 150kgs per operating day

All Sales are paid in the month of sale

Wages are paid in same month

oGST refund / remittance is quarterly, at 28 days after end of quarter

oIncome Tax is paid 6 monthly in July and January

All Boats Registration & Insur is paid

o7 months paid in March

o5 months in paid in October

Fishing Association Subscription is paid monthly

Sickness & Accident Insurance is paid monthly

All licence fees are paid annually in January

PO Box is paid annually in April

Super is paid quarterly 28 days after end of each quarter.

All other expenses are paid for by cash same month

Other relevant information

depreciation used is straight line, not diminishing value

the quantity of fish food use is directly proportionate to the catch

the amounts for repairs to Cod nets is directly proportionate to the catch

other expenses do NOT vary with the catch

the supervisor is responsible for crew, fish food, repairs to Cod Boat, repairs to nets & equipment, plus outboard boats and vehicles

the 3 outboard boats need two operators each

each outboard boat can catch up to a maximum of 50kg per day

Patrick mans the Cod boat (is not on outboards)

The Income Statement (also called Profit & Loss Statement) for the year ended 30th June 2016 follows.

Also following are figures for October 2016 actual trading results, which is assumed as an average and typical month. (Note because of seasonality the operations only operate for 10 months each year, not 12 months)

The Profit and loss statement for the 12 months to June 30th, 2016 showed:

2016 Actuals

12 months 1/7/2015 to 30/6/2016

2016 average for each of the 10 operating months

Sales (average 30 days @ 150kg @ $35.00 /kg)

1,575,000

157,500

Boat Expenses

Petrol & Oil

454,545

45,455

Depreciation of Cod Boat

60,000

5,000

Cod Boat Registration & Insur

28,571

2,381

Depreciation 3 Outboard Boats

15,000

1,250

3 Outboard Boats Reg & Insur

16,571

1,381

Repairs to Cod Boat Equip

4,091

409

Mobile Phone Expenses

11,364

1,136

Six Crew's Wages

319,191

31,919

Six Crew's Super

30,323

3,032

939,657

91,963

Cod Nets Expenses

Repairs to Cod Nets

50,000

5,000

Fish food Expenses

194,175

19,417

License Fee

22,857

1,905

267,032

26,322

Vehicle Expenses

Petrol, Oil & Tyres

8,182

682

Depreciation of Vehicles

20,400

1,700

Vehicles Registration & Insurance

4,571

381

33,153

2,763

Administration Expenses

Post Box Hire

109

9

Depreciation of Office Equipment

3,000

250

Stationery & sundry & admin exp's

273

23

Home Office Electricity

764

64

Fishing Association Subscription

2,727

227

Sickness & Accident Insurance

28,571

2,381

35,444

2,954

Finance

Interest Expense

38,400

3,200

Loan Service fees

1,200

100

Bank Fees

1,714

143

41,314

3,443

Total Budgeted Expenses

1,316,609

127,445

Budgeted Net Profit

258,389

30,055

required to prepare, interpret and manage budgets and financial plans.

For this project you are to use as a business model the example of Patrick's Cod Fishing Ltd, details of which are provided as an Appendix to this assessment.

This assessment is to be undertaken in five parts, which should be undertaken consecutively.

TASK 1:

You are required to a detailed annual Profit & Loss (INCOME STATEMENT) budget for 2017, based on the historical financial information for 2016 and the initial assumptions given for 2017 in the Appendix. Your budget should be prepared using MS Excel or similar software. Make sure you isolate all variables in a way that you can readily determine the effect different of assumptions and changed circumstances.

TASK 2:

summary report as a guide to clarify your budget outcomes and report should include

1. An explanation of the trend in budgeted profit
2. An opinion (with your rationale) on whether each of the assumptions are reasonable or should be reviewed
3. Any recommended changes to the base assumptions

TASK 3:

Revise your budget for all changes agreed in Task 2, and final budget. budget document should include a list of all assumptions).

TASK 4:

Patrick is concerned that new fishing regulations could be introduced which would restrict the maximum daily catch to 100 kg. Market indications do however indicate that if supply is reduced so dramatically, then price increases of 15% would be achievable.

Contingency Plan, with explanations of the contingency actions you have included, which would prepare Patrick for these circumstances and still provide for an annual budgeted profit of at least $150,000.

TASK 5:

Prepare two budget information packs to disseminate relevant details of the final budget to Patrick and staff members.

Note that only information relating to issues under their control should be provided to each recipient, and confidential information should not be included in the staff packs. Where relevant, include notes of available support to ensure that team members can competently perform required roles associated with the management of finances.

DOCUMENTS TO BE SUBMITTED

1)Detailed initial annual P&L Budget for 2017 (Task 1)

2)Summary report as a guide clarifying budget outcomes (Task 2), including-

i.An explanation of the trend in budgeted profit

ii.An opinion (with rationale) on whether assumptions are reasonable

iii.Recommended changes to the base assumptions

3)Detailed final annual P&L Budget for 2017 (Task 3)

4)Contingency Plan with explanations (Task 4)

5)Two budget information packs (Task 5) including guidance notes on how team members can competently perform required roles